Brexit decision hits European pharma shares

Shares of leading UK companies have plummeted after the country’s seismic decision to leave the European Union.

London’s FTSE 250 Index fell 11.4% this morning, making it the worst ever decline. The value of the pound has also fallen sharply against all major currencies as traders fear the uncertainty and potential damage to the UK economy of Brexit.

British voters had been warned of dire economic consequences of the UK exiting the European Union. Nevertheless 17.4 million people, representing 51.9 % of voters, backed the Leave campaign, with the result confirmed in the early hours of the morning.

Pro-Brexit politicians such as UKIP’s Nigel Farage say the market panic will be shortlived, and say UK voters took the decision partly in defiance of banks and economists and ‘the establishment’ who virtually all backed continued EU membership.

The near 50/50 split in the UK shows starkly divided opinion, with London and Scotland and Northern Ireland all voting to ‘Remain’, but victory went to Leave campaigners in Wales and in England beyond the capital, where anti-EU sentiment was strong.

Pharma and biotech companies had strongly backed remaining, and have reacted with concern at the outcome.  Polling results showed those areas which are home to pharma companies and their employees – such as Cambridge, Oxford, Windsor and Guildford – were the exception to the rule in England, all mustering a Remain majority vote.

The decision has hit share in many European biotech stocks, with UK-based AstraZeneca suffering, along with Germany’s Bayer and Switzerland’s Roche. GSK was one of few companies in the sector which saw its stock rise, suggesting the markets will come to a more considered verdict once the implications of Brexit become clearer.

However one of the UK’s most respected investors said he believed Brexit would not prove to be economically damaging,

Neil Woodford is also a specialist investor in UK biotech and pharma companies, a long term supporter of companies such as AstraZeneca and rising star biotech Immunocore.

He said his firm’s research led him to believe that “the trajectory of the UK economy, and more importantly the world economy, will not be influenced significantly by today’s outcome.”

Woodford has reiterated his belief that the global economic backdrop would continue to be challenging, regardless of Brexit, and said the decision would be dwarfed by other economic issues.

However Chancellor George Osborne had warned that the move could trigger a recession in the country, and a fall in the value of sterling is also certain to lead to a rise in inflation.

Prime Minister David Cameron has this morning also announced his resignation, effective from the Autumn, which will create further political and economic uncertainty.

As Scotland voted by a large margin to remain in the EU, the Scottish Nationalist Party is already talking of a new referendum to determine whether it will stay a part of the UK, or break away.

One area in which it seems most likely that the UK will lose out is in medicines regulation – the EU’s European Medicines Agency is currently based in London, but seems certain to transfer to another European capital after Brexit is completed.

This is likely to undermine the UK’s place as a leader in medical sciences, with the country’s own national medicines regulator the MHRA set to lose out on current funding from work carried out for the EU.

Another key issue for British voters is the future of the NHS, which is currently under huge strain because of limited funding. The NHS was a major issue in the referendum campaign, with claim and counterclaim regarding the impact of Brexit on its funding, and the availability of foreign workers to fill clinical roles should new immigration caps be imposed.

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